The American Bankers Association (ABA) filed a strongly worded comment letter with the Farm Credit Administration (FCA) regarding regulations the FCA has proposed. In brief, the trade group does not like them. In fact, ABA calls the proposed regulations “illegal, ill-considered, and irresponsible.”

The proposed regulations that have the ABA so riled would authorize Farm Credit System lenders to provide financing through debt and equity investments, including investments in venture capital funds. “Redirecting such a large percentage of farmer- and rancher-owned capital into financing long-term, uncertain, less liquid, non-farm related projects threatens the safety and soundness of the Farm Credit System,” the ABA said in its letter.

“Should a percentage of the ‘investments’ fail, the owners of the Farm Credit System — the farmers and ranchers — and the country’s agricultural industry as a whole would suffer severe consequences,” said Edward L. Yingling, president and CEO of ABA.

ABA also warned that the proposed rule, if adopted, would “shift FCS institutions away from their express statutory mission of serving farmers and ranchers.”

ABA says that more than 4,360 bankers have written letters opposing the proposal, pointing out that it is beyond the authority granted by Congress to the FCA to approve such a fundamental change in its statutory mission. The comment period closes on August 15, 2008.

The ABA is not alone in its opposition to the latest FCA proposal. House Financial Services Committee Chairman Barney Frank (D-Mass.) and Ranking Member Spencer Bachus (R-Ala.) signed a letter protesting the FCA’s plan, as did the top Democrat and Republican on the Financial Institutions and Consumer Credit Subcommittee, Reps. Carolyn Maloney (D-N.Y.) and Judy Biggert (R-Ill.).